President-elect Donald Trump recently nominated ExxonMobil CEO Rex Tillerson to be secretary of state. That company and Venezuela have been hostile toward each other over the past decade — which means Tillerson’s nomination suggests that the United States and Venezuela have a tense relationship ahead.
Venezuela is in a stunning economic crisis, with triple-digit inflation, scarce food and medicine, and a weakening currency. The Venezuelan government blames all this on “economic war” waged by the United States and the Venezuelan opposition.
[interstitial_link url=”https://www.washingtonpost.com/news/monkey-cage/wp/2016/05/18/6-things-you-need-to-know-about-venezuelas-political-and-economic-crisis/?utm_term=.5d66371fac36″]6 things you need to know about Venezuela’s political and economic crisis[/interstitial_link]
Over the past two decades, the United States and Venezuela have had a difficult relationship. Since the 1998 election of Hugo Chávez as president, Venezuela has criticized U.S. foreign policy, including the “war on terror”; promoted socialist and left-wing governments throughout Latin America; and sought to create a multipolar world by embracing anti-U.S. leaders in Belarus, Cuba, Iran and Russia.
Chávez accused the United States of sponsoring a coup d’etat that temporarily removed him from power in 2002. The United States regularly accuses Venezuela of undermining democracy, restricting economic freedom and, until recently, supporting the Revolutionary Armed Forces of Colombia (FARC).
[interstitial_link url=”https://www.washingtonpost.com/news/monkey-cage/wp/2016/10/02/how-can-colombia-stop-former-farc-rebels-from-turning-to-crime-the-leaders-are-key/?utm_term=.fa3afa8e5300″]Here’s how Colombia can stop former FARC rebels from turning to crime[/interstitial_link]
The Obama administration may have started to normalize relations with Cuba, but doing so with Venezuela has been difficult. That prospect now appears dimmer than ever.
Here’s some basic background about U.S.–Venezuelan relations.
After Chávez’s death in 2013, Venezuelans elected his appointed successor, Nicolás Maduro, who vowed to continue consolidating socialist policies within the country. Maduro has condemned the Obama administration’s foreign policy, including military intervention in Libya, and accused it of waging an economic war.
Following protests against the Venezuelan government in 2015, Obama, through an executive order, imposed sanctions on a handful of Venezuelan state security leaders for alleged human rights abuses and declared the country an “unusual and extraordinary threat” to the United States, due in part to the threat posed to “the U.S. financial system from the illicit financial flows from public corruption in Venezuela,” as the order reads.
Maduro lambasted this and met with U.S. diplomats to work toward normalizing relations. In September, Maduro met with Secretary of State John F. Kerry in Colombia and held talks with Undersecretary of State Tom Shannon in Caracas in October. Despite condemning Trump during the campaign, Maduro sent a congratulatory message saying that he hoped for better relations with the United States.
Under Tillerson, ExxonMobil has clashed with Venezuela. Repeatedly.
A Secretary of State Tillerson will probably make normalizing relations impossible.
[interstitial_link url=”https://www.washingtonpost.com/news/monkey-cage/wp/2016/10/17/people-are-comparing-donald-trump-to-hugo-chavez-thats-mostly-wrong/?utm_term=.57c84a6f373b”]People are comparing Donald Trump to Hugo Chávez. That’s mostly wrong.[/interstitial_link]
In 2007, Venezuela tried to buy majority stakes in all oil ventures within its borders. Although most corporations accepted the deals offered by the government, ExxonMobil and ConocoPhillips rejected them. When the government offered to pay ExxonMobil the book value for its assets, the company asked for what it considered the market value. As a result of the disagreement, Chávez sent state oil workers, along with members of the military, to seize ExxonMobil facilities that May.
ExxonMobil had transferred its Venezuelan holdings to a subsidiary based in the Netherlands. And so ExxonMobil sought international arbitration based on a bilateral investment treaty between the Netherlands and Venezuela, within the World Bank’s International Center for Settlement of Investment Disputes.
In October 2014, ICSID ordered Venezuela to compensate ExxonMobil for $1.6 billion. Because ExxonMobil had requested nearly $15 billion, Venezuela claimed a victory.
Less than a year later, ExxonMobil directly confronted the Venezuelan government in Guyana.
For more than 100 years, the Venezuelan and Guyanese governments had both claimed the territory known as the Essequibo, which borders both countries — and for decades, no oil companies explored it. But in May 2015, ExxonMobil announced that it had discovered oil reserves off the coast of the disputed region and would work with the newly elected Guyanese president, David Granger, to extract the Essequibo’s resources.
This announcement sent the Venezuelan government into a flurry.
Maduro announced that ExxonMobil was trying to destabilize peace in the region by siding with Guyana, and the Venezuelan military began to hold exercises along the disputed border. In an interview with Telesur TV in July 2015, Maduro asserted that there:
. . . is a brutal campaign against Venezuela, financed by ExxonMobil. It’s a campaign to corner Venezuela, to lead it to high-intensity conflict [with Guyana], to undermine the policy of peace that we have implemented.
That same month, the Venezuelan National Assembly united behind the president’s claims, as The Washington Post reported. It passed a declaration that charged the Guyanese government with “attacking the dignity of the Venezuelan people” with backing from Exxon Mobil and “the U.S.-international oil lobby” — all of which was “a dangerous provocation that undermines a peaceful diplomatic solution.”
For its part, ExxonMobil has repeatedly complained about the Venezuelan government to U.S. diplomats stationed around the globe. In 2006, for instance, the manager of a Nicaraguan ExxonMobil refinery reported to then-Ambassador Paul Trivelli that he believed that the Venezuelan government was urging Nicaragua to push the company out of the country. According to a classified U.S. Embassy cable released by WikiLeaks, during a meeting with an embassy economic officer in Nigeria in 2008, Mark Ward, ExxonMobil’s executive director for exploration and production in Nigeria, also:
. . . accused Venezuela of trying to turn Nigeria, and other oil producers, against international oil companies in general and ExxonMobil in particular as part of Venezuela’s ongoing dispute with Exxon. Ward claimed Venezuela was encouraging Nigeria to develop its state owned oil company as an alternative to international oil companies and was offering Nigeria help in doing so.
Given Tillerson’s background at ExxonMobil, we can expect the Trump administration to take an aggressive stance toward Venezuela. This may include sanctions on more Venezuelan state officials and even an end to high-level diplomatic meetings. Expect more friction over the next few years.
Timothy M. Gill is a postdoctoral fellow at the Center for Inter-American Policy and Research at Tulane University.